Arbitrage Betting Glossary

Arbitrage Core Terms

Arbitrage Betting

A strategy where you place bets on all possible outcomes of an event across different bookmakers to guarantee a profit regardless of the result. Also called arb betting, sure betting, or miracle bets. It works when combined implied probabilities across venues are below 100%. See the complete arbitrage guide.

Arb % (Arbitrage Percentage)

The sum of inverse decimal odds across all outcomes. Formula: Arb% = (1/Odds_A) + (1/Odds_B). If the result is below 1.00 (100%), an arbitrage exists. The lower the arb %, the higher the profit margin. A result of 0.97 means a 3% guaranteed return.

Sure Bet

Another name for an arbitrage opportunity. A set of bets that guarantees profit regardless of the outcome. "Sure bet" is more common in European markets; "arb" is more common in US markets.

Middle (Middling)

A bet where both sides can win if the final result falls in a specific gap. Common in point spreads. Example: bet over 48.5 at one book and under 50.5 at another, both win if the total lands on 49 or 50. Related to arbitrage but with upside rather than guaranteed profit.

Naked Leg

When one side of an arbitrage trade is filled but the other side fails to fill. This leaves you with directional exposure instead of a hedged position. Naked legs are the biggest risk in automated arbitrage execution. Good arb systems detect and track naked legs to prevent cascading exposure.

Hedge

A bet placed to offset risk on an existing position. If you already hold a bet on Team A, hedging means betting on Team B to lock in some profit or reduce loss regardless of outcome. Full hedging produces a guaranteed (but smaller) return.

Dutching

Betting on multiple outcomes proportionally so that any winner returns the same profit. Used in horse racing and multi-outcome markets. Similar math to arbitrage but typically within a single bookmaker.

Stake

The amount of money risked on a bet. In arbitrage, stakes must be calculated precisely across all outcomes to guarantee equal profit regardless of which side wins.

Odds and Probability

Decimal Odds

Odds format where the number represents the total return per unit staked. Odds of 2.10 mean a $1 bet returns $2.10 ($1.10 profit). Used across Europe, Australia, and most prediction markets.

American Odds (Moneyline)

Odds format using + and - signs. +200 means bet $100 to win $200. -150 means bet $150 to win $100. Used primarily in US sportsbooks. Convert using the odds converter.

Fractional Odds

Odds expressed as fractions like 5/2. Represents profit over stake: 5/2 means $5 profit per $2 staked. Used primarily in UK and horse racing.

Implied Probability

The probability implied by a set of odds. Formula: 1 / decimal_odds. Decimal odds of 2.00 imply 50% probability. Implied probabilities across all outcomes sum to more than 100% due to the bookmaker's margin.

True Probability

The actual probability of an event occurring, independent of bookmaker margin. Calculated by stripping the overround from implied probabilities. Used in value betting and no-vig analysis.

Overround (Vig, Juice, Margin)

The bookmaker's built-in profit margin. Calculated as sum of all implied probabilities - 1.00. A book with 105% overround takes 5 cents per dollar wagered on average. Sharp books have lower overround; recreational books have higher.

No-Vig Odds (Fair Odds)

Odds stripped of the bookmaker's margin. The "true" odds that represent the market's actual probability estimate. Formula: fair_prob = implied_prob / sum_of_all_implied_probs. Used as a reference for finding value bets.

Value Betting and EV

Value Bet

A bet where the offered odds imply a probability lower than the true probability. Value bets have positive expected value. Unlike arbitrage, value bets can lose individually but profit over many trials. See value betting vs arbitrage.

Expected Value (EV)

The average profit or loss per bet over many trials. Formula: EV = (true_prob × payoff) - (1 - true_prob) × stake. Positive EV means the bet is profitable long-term; negative EV means the bet is unprofitable long-term.

+EV (Positive EV)

A bet with positive expected value. You expect to profit over a large sample. Most sports bettors target +EV bets. Professional bettors combine +EV picks with proper bankroll management.

-EV (Negative EV)

A bet with negative expected value. Over time, these bets lose money. All bets at a bookmaker with positive overround are -EV unless you have an edge.

CLV (Closing Line Value)

The difference between the odds you got and the final closing odds. Positive CLV means you bet at better odds than the market settled on. Long-term CLV is the strongest predictor of betting profitability, more reliable than short-term results.

Edge

Your advantage over the market, measured in percent. A 3% edge means you expect to make 3 cents for every dollar wagered. Edges come from better information, faster execution, or exploiting structural inefficiencies like arbitrage.

Bankroll and Position Sizing

Kelly Criterion

A formula for optimal bet sizing. Formula: f* = (bp - q) / b where b = decimal odds - 1, p = true probability, q = 1 - p. Full Kelly maximizes long-term growth but has high volatility. Most professionals use fractional Kelly (half-Kelly or quarter-Kelly).

Bankroll

Total capital allocated to betting. Good bankroll management limits risk per bet (typically 1-5% for value bets, up to 100% for pure arbitrage since risk is near-zero).

Risk of Ruin (RoR)

The probability of losing your entire bankroll given your strategy, edge, and bet sizing. Calculated using Kelly math. Lower is better; professionals target under 1%.

Variance

The volatility of betting results. Higher variance means bigger swings up and down even with a positive edge. Arbitrage has near-zero variance; value betting has high variance.

Prediction Market Terms

Prediction Market

A market where contracts pay out based on real-world event outcomes. Prices reflect the market's implied probability. Examples: Kalshi, Polymarket, Manifold. See Kalshi vs Polymarket arbitrage.

Kalshi

US-based CFTC-regulated prediction market. Binary contracts trade from 1 to 99 cents. Settlement in USD. Requires US residency. Charges a fee tier on winnings (default 7%, lower for high-volume accounts).

Polymarket

Crypto-native prediction market running on Polygon (Ethereum L2). Contracts settle in USDC. Global access, no KYC for most markets. Operates a central limit order book (CLOB) with off-chain matching and on-chain settlement. No direct fees but gas costs apply.

CLOB (Central Limit Order Book)

Order book system used by exchanges including Polymarket. Buyers and sellers post limit orders and matches happen at the spread. Contrasts with AMM (automated market maker) systems used in DeFi.

Binary Contract

A contract that pays $1 if an event happens and $0 if it doesn't. Price reflects market probability. Used on Kalshi and Polymarket.

Cross-Venue Arbitrage

Arbitrage between two prediction markets (e.g., Kalshi vs Polymarket) or between a prediction market and a sportsbook. Exploits pricing differences between venues with different user bases and fee structures.

Cross-Book Arbitrage

Arbitrage comparing sharp sportsbook odds (like Pinnacle) against prediction market prices. Since sharp books aggregate global flow, they serve as reference prices. Discrepancies vs prediction market prices create edges.

Execution and Infrastructure

Sharp Book (Sharp Sportsbook)

A sportsbook that accepts high limits from winning players and reflects true market prices. Pinnacle (PS3838) is the canonical example. Sharp books have lower margins and serve as reference prices for the market.

Soft Book

Recreational sportsbooks that limit winning customers and use wider margins. Most US and European books are soft. Targets for value betting and arbitrage.

Limit Order

An order to buy or sell at a specific price or better. Unlike market orders, limit orders don't execute until the price hits your target. Used for "sniping" favorable odds.

Sniping (Odds Sniping)

Setting automated limit orders to capture temporary pricing inefficiencies. When odds shift to your target level, the bot executes immediately. Requires low latency and always-on monitoring.

Slippage

The difference between the expected execution price and the actual price received. Caused by orderbook depth, latency, and market movement. Arbitrage calculations must account for slippage to avoid phantom edges.

FOK (Fill-or-Kill)

Order type that must fill completely and immediately, or is cancelled entirely. Used in arbitrage to avoid partial fills that would leave naked exposure.

FAK (Fill-and-Kill)

Order type that fills as much as possible immediately and cancels the rest. Useful when partial execution is acceptable.

Orderbook Depth

The volume available at each price level in an orderbook. Shallow depth means you can only fill small sizes before moving the price. Critical for understanding realistic execution in arbitrage.

WebSocket Feed

Real-time streaming data connection. Used by arbitrage bots to receive price updates the instant they happen, typically 10-100x faster than REST polling. Essential for capturing short-lived arbitrage windows.

Latency

Time delay between price change at a venue and your system seeing it. Lower latency = faster execution = more captured arbs. Measured in milliseconds. Competitive arb systems operate below 100ms end-to-end.

Risk Management Terms

Kill Switch

An emergency stop mechanism that halts all trading immediately. Triggered manually or automatically based on risk thresholds (daily loss, unusual patterns, venue issues).

Exposure

Total directional risk across open positions. Naked legs create uncovered exposure. Good risk systems cap maximum exposure per market and per venue.

Position Sizing

Determining how much to bet on each opportunity. Depends on edge size, confidence, bankroll, and correlation with other positions. Kelly criterion is the standard optimal framework.

Related Guides

Want to go deeper? Start with What Is Sports Arbitrage Betting, or explore the math in Arbitrage Betting Calculator. For prediction market specifics, see Kalshi vs Polymarket Arbitrage. All free calculators are at clawarbs.com/tools/.